Evergrande crisis shines a light on China’s millions of empty homes

For weeks, the ailing Chinese real estate conglomerate has made headlines as investors wait to see what will happen to its enormous mountain of debt. As the slow-moving crisis unfolds, analysts are pointing to a deeper underlying issue: China’s property market is cooling off after years of oversupply.

The warning signs have been flashing for some time. Prior to Evergrande’s meltdown, tens of millions of apartments were thought to be sitting empty across the country. In recent years, the problem has only gotten worse.

On top of that, about 100 million properties have likely been bought but not occupied, which could accommodate roughly 260 million people, according to Capital Economics estimates. Such projects have attracted scrutiny for years, and even been dubbed China’s “ghost towns.”

Here’s a look at some of those projects, and how the problem first originated.

Real estate and related sectors are a massive part of China’s economy, accounting for as much as 30% of GDP. The proportion of economic output related to construction and adjacent activities is “far higher than in other major economies,” according to Williams.

For decades, that has helped the country sustain rapid economic growth.

But for years, critics have questioned whether that engine of growth was creating a ticking time bomb for the world’s second largest economy. That’s in part because of the massive debt many developers took on to finance their projects.

As China’s most indebted developer, Evergrande has become the poster child of unsustainable growth, with more than $300 billion worth of liabilities.